AccountsRecovery.net is excited to launch a new series of articles that will help shed light on the issues facing collectors when it comes to complying with laws such as the Fair Debt Collection Practices Act and the Telephone Consumer Protection Act, as well as defending themselves against complaints filed with the Consumer Financial Protection Bureau. The series is sponsored by WebRecon, which offers a free report that tracks consumers who are frequent filers of lawsuits. Know who the problem customers are, before they sue you.
It was at ACA International’s annual convention in Boston last month and a handful of professionals were seated around a table at the far end of the exhibit hall, killing time until a general session a floor below started. The men talked and listened as they shared stories about their different experiences in the industry. It was likely similar to dozens of other conversations that were shared in Boston and countless more at other industry events and gatherings every year.
And like many of those conversations, this one in Boston was very much focused on lawsuits. The executives regaled each other with tales of the brazenness of consumers and plaintiffs’ lawyers and the fortitude of collection agency owners who took stands against what they considered to be ridiculous lawsuits.
For the collections industry, lawsuits are the war wounds, the battle scars that mark a career in the industry, like rings on a tree. For many agencies, lawsuits are part of the game. They are an unfortunate byproduct of what is often an unpleasant customer interaction that is littered with rules and regulations that must be followed, to the letter. The slightest slip-up in either area can, and often does, lead to a lawsuit.
But agencies nationwide choose to deal with lawsuits in different ways. Some agree to settle cases before they ever see the inside of a courtroom. Some fight to the bitter end, hoping to find some moral victory in the sea of expenses and paperwork. How to make that decision is often more art than science.
At its most basic level, the decision whether to fight or settle a lawsuit is a cost-benefit analysis. How much is it going to cost to settle a lawsuit compared with the cost of fighting it. And the cost of settling is very often the lesser of two evils.
“For us, the decision to settle is a business decision,” said Scott Brownlee of Grimley Financial Corp. “It’s not moral or ethical – we want to defend each one to the death because, in most cases, we didn’t do anything wrong.”
And, at the end of the day, agents often have to stand up and say that enough is enough. Plaintiffs’ lawyers talk and if word gets out that an agency is prone to settling, then it can become open season on that company.
“If you have the same firm coming back repeatedly, you have to choose a good case and sink your teeth into it,” said Harry Strausser of The Remit Corp. “But I know if I sink my teeth into it, I’m looking at $10,000.”
And that kind of figure can be a big issue for smaller agencies. Smaller agencies, to find that kind of money, could have to consider laying people off in order to fund a defense of that size.
When it comes to size, the size of the suit matters, too. Brownlee says that the amount of work that would have to go into providing all the documentation and information requested by a plaintiffs’ attorney in a lawsuit is a larger determinant of whether the firm settles or not.
“When you read the complaint and it’s got nine pages of questions and they want hours and hours of work, even though it has nothing to do with the case, you have to consider settling,” Brownlee said. “They overwhelm you with the ridiculousness of the requests. That puts us in a horrific Catch-22. It can be incredibly cost-prohibitive to defend yourself against every lawsuit.”
Another issue related to the questions and information that plaintiffs’ attorneys ask for in lawsuits is also a Catch-22, because by sharing so much information about a company, it opens the doors to uncovering other violations or actionable items, Strausser said.
But at the end of the day, the industry has to stand up for itself.
“You have to stand up to the playground bully,” said Jeff DiMatteo of American Profit Recovery. “We had one attorney who sued us three times eight years ago. We fought one case and he didn’t sue us again for four years. We need more companies to stand up and fight. Just to avoid having a target on our backs.”